Wednesday, October 4

Government Banks’ Losses Crossed Rs 87,000 This Year

The fiscal 2017-18 showed losses for the public sector banks crossing a tremendous amount of Rs 87,300 crore, with Punjab National Bank on the top with a fraud contaminated amount of nearly Rs 12,283 crore.

Our country consists of over 21 public sector banks and among them, only two banks have shown profitability during the financial year 2017-18, namely Indian Bank and Vijaya Bank.  Indian Bank showed the highest profit of Rs 1,258.99 crore and on the other hand, Vijaya Bank’s profit was Rs 727.02 crore.

The Delhi-based Punjab National Bank is losing its balance under a fraud amounting around Rs 14,000 crore, reportedly being carried out by Nirav Modi and associates, and has shown a net loss of Rs 12,282.82 crore in the previous financial year. The bank had posted a profit of Rs 1,324.8 crore in 2016-17.

After Punjab National Bank, IDBI Bank’s loss amount was worth the notice. It followed PNB in the race and showed losses amounting to Rs 8,237.93 crore in the fiscal ended March 2018 from Rs 5,158.14 crore in the previous year.

The country’s largest and most reliable bank, State Bank of India was also in the league of the PSBs under huge losses. SBI’s net loss in 2017-18 amounted to Rs 6,547.45 crore as against a net profit of Rs 10,484.1 crore in 2016-17.

According to the latest quarterly numbers posted by these lenders, the 19 government sector banks in total posted a net loss of Rs 87,357 crore during fiscal 2018.

Indian banking sector is struggling with escalating and increasing non-performing assets (NPAs) and host of scams and frauds. The NPA in the public banking sector amounted to at Rs 8.31 lakh crore as of December 2017.

Under the Prompt Corrective Action (PCA) framework of the Reserve Bank, 11 banks have already been pushed out of 21 government-owned banks because of the ever increasing and soaring bad loans. The recent tight prudential norms released by the RBI on February 12 have added to the NPA woes.

A committee will be set up by Piyush Goyal, Interim Finance Minister with the aim to give guidance and suggestions in two weeks on formation of an Asset Reconstruction Company for faster resolution of stressed accounts.

On the other hand, the committee under Sunil Mehta who is the non-executive chairman of Punjab National Bank, will make recommendations in two weeks on the matter of setting up of an Asset Reconstruction Company or Asset Management Company for faster resolution of stressed accounts.

The finance minister stated that the committee will look after whether or not such an arrangement is favorable for the banking system and, if any such suggestion is advisable, it will also consider the modalities by which such an ARC and/or and AMC should be set up.